MercoPress. South Atlantic News Agency

Pound at USD 1.785 and at record low against the Euro

The British pound has fallen to two-and-half-year low against the US dollar and record low against the Euro amid fears about the health of the UK economy.

Sterling fell as low as $1.7850 on Tuesday, and was trading at 81.62 pence per Euro. Measured against a basket of currencies used by major trading partners, the pound is now at a 12-year low. Sterling has fallen sharply over the past month - in mid-July one pound bought two dollars - as fears increased the UK was heading for a recession. At the same time, the dollar has been helped by a fall in the price oil. The US currency has been gaining ground in recent weeks and on Tuesday the Euro fell to a seven-month low versus the dollar, dipping below $1.45. Falling oil prices, which hit a five-month low on Tuesday, have been a factor behind the dollar's rally. Investors had bought commodities to protect against the dollar's weakness earlier this year but are now unwinding those positions - to the US currency's benefit. Analysts also said the dollar was strengthening because the US economic outlook appeared better than the deteriorating picture in the UK and the Euro zone economies. Gloomy comments over the weekend from UK Chancellor Alistair Darling, who warned that Britain was facing its toughest economic challenge for 60 years, triggered sterling's plunge on Monday. Darling's comments were underscored by a raft of new economic data â€" covering everything from house prices and mortgage lending to manufacturing â€" indicating that Britain is on the brink of a recession. The Paris based Organization for Economic Cooperation and Development, OECD, said on Tuesday that the UK economy is likely to fall into recession this year. The think tank predicts that the UK economy will shrink at an annual rate of 0.3% in the third quarter and by 0.4% in the fourth. According to the latest official figures, the UK economy did not grow at all in the second quarter of 2008. In its latest report, the OECD says that the UK economy will grow by just 1.2% for the whole of 2008, a sharp reduction in its earlier forecast of 1.8% made just two months ago, and less than the 1.4% predicted by the IMF. The OECD's figure is less than half the official Treasury forecast of 2.5%, although the Chancellor has recently indicated that this was likely to be revised downwards as the UK was facing "the worst economic conditions in 60 years".